Water Demand Management versus Water Supply Policy: the Ebro River Water Transfer José Albiac Unidad de Economía Agraria Servicio de Investigación Agroalimentaria Water Forum 2002 Inter-Basin Transfers May 6-8, 2002 Demand Management and Transfer

Irrigation in Spain Spain is a country with a land surface of 506,000 km 2 and annual precipitations around hm 3 (684 mm), with large spatial and temporal rainfall variation. Total river flow is 110,100 hm 3, with a water storage capacity of 56,100 hm 3, and an average storage around 25,000 hm 3. Demand Management and Transfer

Water demand for consumptive uses reaches almost 30,400 hm 3, divided between 24,100 hm 3 for agricultural uses and 6,300 hm 3 for urban and industrial consumption. New urban and industrial demands and the emergence of environmental concerns related to water provision and usage are creating pressures to introduce new water management policies. Demand Management and Transfer

In the present scenario of water scarcity, the assignment of water among competing uses has created strong conflicts among user groups and regional governments. The water scarcity is specially acute in the Southeastern watersheds, because the expansion of fruit and vegetable production has created a huge demand for water, triggering over-exploitation of aquifers and degradation of hidric systems. Large investments are proposed by the National Hydrologic Plan to transfer water from the Ebro basin to the Southeastern basins (6 billion €). Demand Management and Transfer

Irrigated area in Spain reaches 3.43 million ha, distributed between 2.31 million ha of arable crops and 0.84 millions of tree crops. Cereals fill 967,000 ha generating an income of 914 million € (1€ = 0.89 US$) “Industrial” crops fill 569,000 ha with 932 million € of income Vegetables area is 357,000 ha generating an income of 3,720 million € Citric and non-citric fruit trees fill 501,000 ha and generate 2,482 million €. Demand Management and Transfer

Cereals and “industrial” crops have an average income per cubic meter much lower than fruits and vegetables: 0.12 €/m 3 for cereals 1.64 €/m 3 for vegetables and 0.84 €/m 3 for fruit trees. Demand Management and Transfer

Cereal in Aragón Donating Ebro basin Demand Management and Transfer

Vegetables in Murcia and Almería Receiving Segura and South basins

Demand Management and Transfer Crop costs and margins in €/ha Yield (kg/ha) IncomeDirect costs Machinery and salary costs Indirect and amortization costs Net margin Corn9,5001, Barley3, Tomato83,000 25,876 1, , Greenhouse tomato 125,000 38,970 4,574 1,934 1,905 30,558 Broccoli26,500 10,352 2,208 1, ,686 Orange26,000 5,546 1, ,113 2,136

Fruits and vegetables are highly profitable crops and a large share of production is located in the southeast where over-exploitation of water resources is severe. The Ministry of Environment indicated in the White Book on Water that in the future the administration will support irrigation areas with high economic profits, but not the low profit irrigated areas of the interior Spain, and the Ebro water transfer is the result of this policy. Demand Management and Transfer

Questions examined Study on water demand management and supply policy The analysis of water demand in the Levante counties shows that a demand management policy with higher prices solves water scarcity, without need for external transfers which would deteriorate the ecological functionality of the Ebro source basin and prolong the current unsustainability of the Júcar, Segura and Sur receiving basins. The study considers water demand management as an alternative to the supply policy of the Ebro water transfer, proposed by the Spanish National Hydrologic Plan. Demand Management and Transfer

Questions examined

Scenarios considered In the first scenario, a strategy is analyzed in which aquifer overexploitation is prohibited, and there are no transfers of water from other basins. The effects on the agricultural sector of alternative solutions to water scarcity, have been examined by two demand management scenarios: In the second scenario, a price raise is considered in order to calculate the price of water that balances the global water demand placed on the basins of Levante with the available water resources of those basins. Questions examined Demand Management and Transfer

The analysis of the impact of alternative solutions to the water scarcity in Levante shows that the ban on aquifer overexploitation as a strategy of demand management without external transfers of water causes a fall of 20 percent in the final agricultural production and net profit in the Levante basins. This alternative would be especially damaging for Almería, while the negative effects would be less in Segura and Júcar. The extent of the impact of this alternative depends on the reassignment of water among the zones where there is scarcity. The ban on overexploitation ofaquifers would be very negative for Almería Elimination of overexploitation Demand Management and Transfer

Location of losses The counties that have the greatest losses in Almería are those which have very profitable crops, and in Segura those which bear the greatest reduction of available water: Campo Dalias, Bajo Almanzora and Campo Níjar- Bajo Andarax in Almería, and Valle del Guadalentín and Nordeste in Murcia. In Campo Dalias income and net income fall 378 and 180 million €, and in Valle del Guadalentín they fall 103 and 44 million €, respectively. Nearly 70 percent of the losses of net profit, that’s 204 million € of 306 in losses, occur in Almería (South basin) Elimination of overexploitation Demand Management and Transfer

Almería Campo Dalias Bajo Almanzora Campo Níjar-Bajo Andarax Murcia Valle del Guadalentín Nordeste Elimination of overexploitation

Even if the proposed transfer is carried out, the overexploitation of aquifers in Almería will not be solved. In any case, to solve this problem it will be necessary to introduce additional measures of demand management that rebalance availabilities and uses. The water allocation envisaged by the NHP to solve aquifer overexploitation in the South basin is only 58 hm 3, which is insufficient to avoid the current overexploitation that reaches 71 hm 3. In contrast, the quantities proposed by the NHP for transfers into the Júcar and Segura basins are much more generous. Elimination of overexploitation Demand Management and Transfer

The alternative of increasing the price of irrigation water balances the global supply and demand for water in the Levante basins, and follows the criteria of the Water Framework Directive. Water prices for agricultural use can continue to be less than those for other uses, but there should be a reasonable increase in prices, which frees up water resources, with an impact not excessive for farmers. This demand management policy is preferable for society, as it has a lower economic and environmental cost than the policy of expanding the supply through transfers from the Ebro Valley. Demand management avoids scarcity with a much lower economic and environmental cost than the water transfer project Price increases Demand Management and Transfer

An increase of 0.12 €/m 3 reduces the size of the water project to 379 hm 3 with a cost to farmers of 294 million € net annual income, which measures the compensation that could be offered by the administration or by other water users, so that the farmers voluntarily accept the raise in water prices. The regional (state) administrations of the conceding basin should negotiate this alternative with the central government, an alternative which reduces the size of the water transfer to Levante from 820 to 379 hm 3. Price increases Demand Management and Transfer

The action of raising prices 0.18 €/m 3 should be seriously considered by public administration heads, political groups and lobbyists as an alternative to the enormous investment in the Ebro water transfer project. An increase of 0.18 €/m 3 eliminates water scarcity in Levante at a cost of 423 million € for farmers, remaining only a deficit of 68 hm 3 in Segura and 49 hm 3 in South, which could be resolved employing desalinization and improving irrigation efficiency. Price increases Demand Management and Transfer

The cost is substantial for farmers, and the necessary compensation so that Levante farmers voluntarily accept the raise in prices is 423 million €, equal to their net annual income loss. This amount could be paid by the administration and other water use groups, so that the society doesn’t carry out the investment of more than 6 billion €. This money could be designated to alternative investments having greater profitability. Price increases Demand Management and Transfer

NHP inconsistency Severe problem of inconsistency in the Segura basin The diverted water will have high costs in the range 0,19-0,75 €/m 3 depending on the county, well above the low price that farmers pay now, and this elevated water price will only pay for itself in counties with high profit crops. The volume of diverted water that the Levante counties can absorb at this price is 863 hm 3 in Júcar, 215 hm 3 in Segura and 112 hm 3 in South. These quantities should be compared with the water allocations for agricultural and environmental use by NHP, which are 141 hm 3 in Júcar, 362 hm 3 in Segura and 58 hm 3 in South. Demand Management and Transfer

Thus, in the Segura basin there is a significant problem of inconsistency in the NHP proposed transfer, since this basin can only absorb 220 hm 3 of water destined to agricultural use at the water transfer prices, which does not cover the NHP assignment of 362 hm 3 designated to end the overexploitation of aquifers and to meet the irrigation guarantee. NHP inconsistency Demand Management and Transfer

Effective water demand, compared with the volume of over- exploitation and irrigation guarantee NHP inconsistency

Transfer subsidy Subsidy of transferred water is feasible, but very costly for nonagricultural users in Segura. In Segura, if a surcharge is placed on the actual urban and industrial water usage in the Murcia region (plus the transfer allotment), in order to subsidize in €/m 3 the allocation for agricultural and environmental use, the surcharge will reach 0.68 €/m 3. The resulting price for urban and industrial users would be about 1.59 €/m 3, similar to the price paid in the Canary Islands. Demand Management and Transfer